INDIA Law and Practice Contributed by: Aditya Jalan, Urvashi Misra, Bhagya K. Yadav and Sushrut Garg, AZB & Partners
a party to perform its contractual obligations. Courts may further grant permanent injunctions, which are final orders restraining a party from committing acts that would violate the plaintiff’s rights (Section 37, 38 Specific Relief Act). Courts may also grant manda- tory injunctions, directing a party to perform a spe- cific act to prevent breach of an obligation (Section 39, Specific Relief Act). Another important category is declaratory relief, whereby the court declares the legal status or rights of a party without necessarily grant- ing consequential relief (Section 34, Specific Relief Act). Courts may also grant recovery of possession of property, particularly in disputes involving immovable property or wrongful dispossession (Part II, Chapter I, Specific Relief Act). 2.8 Damages Under Section 73 of Indian Contract Act, 1872, a party is entitled to unliquidated damages for losses from breach that arise naturally or were contemplated at the time of contract. Courts assess damages on the basis of remoteness, and exclude claims for indirect or remote losses. Further under Section 74, courts may award reason- able compensation up to the stipulated amount for liquidated damages or penalty. The Supreme Court in Fateh Chand v Balkishan Das , 1963 SCC OnLine SC 49 has held that under Section 74 damages are compensatory, with courts awarding only reasonable compensation within the stipulated amount. Arbitration is a favoured dispute resolution mecha- nism amongst private parties. In fact, India has been among SIAC’s top three users in the past decade. It is particularly used in commercial transactions, infra- structure contracts and in cases when a cross-border element is involved. In the recent years, we have seen the government take a step back from opting for arbitration as a dispute resolution mechanism in certain cases. For instance, in 2024, the Finance Ministry issued guidelines in con- nection with contracts of domestic procurement, cau- 3. Arbitration 3.1 Prevalence
tioning government entities/ agencies against routine- ly/ automatically including arbitration as a method of dispute resolution in procurement contracts/ tenders. 3.2 Restrictions on Use of Arbitration The use of arbitration in India is subject to the doctrine of arbitrability ie, judicial determination of whether a dispute is capable of settlement by arbitration. Indian law treats certain disputes as non-arbitrable, including criminal, matrimonial, guardianship, insolvency, testa- mentary matters, and those under statutes granting exclusive jurisdiction. The Supreme Court in A . Ayyasamy v A . Paramasivam , (2016) 10 SCC 386 and Vidya Drolia v Durga Trading Corpn ., (2021) 2 SCC has formulated tests for deter- mining non-arbitrability. This includes including cases where the dispute (i) relates to rights in rem, (ii) seri- ous questions of fraud (iii) affects third-party rights, (iv) involves sovereign or public interest functions, or (v) is expressly or impliedly non-arbitrable by statute. 3.3 Advantages of Arbitration The advantages of arbitration proceedings include party autonomy and expeditious resolution of dis- putes in comparison to a court driven litigation, con- fidentiality and the ability to choose the individuals who will ultimately decide the dispute (Section 42A, Arbitration Act). 3.4 Disadvantages of Arbitration Arbitration in India sometimes face delays at the post- award stage ie, during challenge or enforcement of award, with courts taking time to decide the same due to the large pendency of cases. 3.5 Arbitral Institutions Prominent arbitration institutions in India include the Mumbai Centre for International Arbitration, the Delhi International Arbitration Centre and International Arbi- tration and Mediation Centre, Hyderabad. Institutions such as Singapore International Arbitration Centre, International Chamber of Commerce, Hong Kong International Arbitration Centre, London Court of International Arbitration remain a popular choice for arbitral institutions.
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